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Negative start to year for GDP in Greece

Economic activity dropped 1.3 percent in the first quarter of the year from the same period in 2015, according to the first estimates by the Hellenic Statistical Authority (ELSTAT) released on Friday. The data serve to prove that the Greek recovery remains a very difficult matter, although the Finance Ministry as well as the country’s creditors believe the country can revert to growth in the second half of 2016.

The year got off to a negative start, showing that for the rebound estimates to be proven correct a number of conditions will have to be met in the remainder of the year. These include the completion of the bailout review within the month, the return of the European Central Bank waiver that will allow local banks access to cheap cash, an agreement on the national debt, incentives for strengthening investments and promoting privatizations, the start of the repayment of state debts to the private sector, and avoiding any more long negotiations with the creditors from September.

The January-March 2016 period was the third consecutive quarter of economic contraction, which started in July 2015, following six quarters of growth in a row from January 2014.

The provisional data for Q1 this year attribute the contraction of the economy mainly to the drop in consumption. Exports and imports were also down. In contrast, investment shows a stability trend compared to the first quarter of last year.

The various sector indices are pointing to another year of recession, which the creditors anticipate to come to 0.7 percent this year, although the government hopes it will be closer to zero. In February retail sales volume fell 6.6 percent annually, and industrial turnover was a remarkable 15.1 percent down on February 2015. Industrial output fell 4 percent in March year-on-year. Exports (including fuel products) dropped 8.9 percent, and even car sales posted a marginal drop in January-April, amounting to 0.04 percent.

ELSTAT also confirmed that there was a 0.2 percent contraction of gross domestic product last year.